Which of the following is NOT a benefit of the spline method of estimating discount functions across a spectrum of maturities?
A)Splines allow fitting curves flexibly to a high degree of fit.
B)Splined curves are continuous.
C)Spot and forward rates obtained from splined curves are always smooth.
D)Splined curves allow fitting linear functions of maturity between knot points.

Question

Quizplus · Accepted Answer

Linear splines of the spot rate are not always smooth and quadratic splines may not give rise to smooth forward curves.

Which of the Following Is NOT a Benefit of the Spline